Direct indirect taxes direct indirect taxes direct

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Direct & indirect taxes Direct & indirect taxes § Direct tax § Economic burden of tax is borne by  person who pays the tax (eg income  tax) § Indirect tax § Person who pays the tax is able to 
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pass on the economic burden of tax  to a third party (eg GST) Tax system design Tax system design § Tax system underpins a country’s  economic, social and political stability § Society more likely to accept taxation if  it: § Sees justification for the tax § Considers the level of tax appropriate § Governments need to be able to  estimate tax revenue for budgeting  purposes Adam Smith’s Maxims Adam Smith’s Maxims § The subject of every State ought to  contribute towards the support of the  government, as nearly as possible, in  proportion to their respective abilities, 
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that is, in proportion to the revenue  which they respectively enjoy under the  protection of the State § The tax each individual is bound to pay  ought to be certain, and not arbitrary.  The time of payment, the manner of  payment, and the quantity to be paid,  ought all to be clear and plain to the  contributor, and to every other person Adam Smith’s Maxims Adam Smith’s Maxims     (cont) (cont) § Every tax ought to be levied at the time,  or in the manner in which it is most  likely to be convenient for the  contributor to pay it § Every tax ought to be so contrived as  both to take out and to keep out of the 
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pockets of the people as little as  possible over and above what it brings  into the public treasury of the State Features of a good tax Features of a good tax     system system § Simplicity and certainty § Tax laws should be clear,  unambiguous and uncomplicated § Taxpayers should be able to identify 
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